LITRG has produced a new factsheet in partnership with PRISM on ‘working through an umbrella company’ to support temporary workers having to grapple with working through an umbrella company.

Introduction

The new ‘working through an umbrella company’ factsheet offers guidance to those working through an umbrella company around their tax and employment status and provides practical tips to help them avoid any problems with their pay and deductions. It has been written with the low-paid in mind – recognising the specific risks that they may face when working through an umbrella company – but may certainly be useful more widely.

Issues covered by the factsheet

The factsheet covers a range of issues on which workers are likely to have questions including holiday entitlement and other employment right issues, the availability (or otherwise) of travel expense relief, and why they may have been handed over to an umbrella company by an agency in the first place. It includes a helpful diagram explaining how umbrella companies work, a sample payslip to help demystify the payslip entries, which can sometimes be confusing, and links to more help. Very importantly, it includes a ‘ready reckoner’ to help workers understand whether the rewards they are being offered through an umbrella company are roughly equivalent to what they might have otherwise received, once the various deductions the umbrella company has to make have been considered.

PRISM

LITRG has worked with PRISM on the factsheet. PRISM is a not-for-profit umbrella company representative body, which has provided invaluable, up-to-date information as to trends in the ever-moving temporary worker sector to ensure the factsheet is current and relevant. The plan is that PRISM will also help distribute the factsheet to workers via their network of umbrella company contacts.

LITRG interest in umbrella companies

LITRG recognised, from researching and writing its 2014 report ‘Travel expenses for the low paid – time for a rethink?’, that the proliferation of, and people’s involvement with, umbrella companies is really very complex. That report covered the use of umbrella schemes in detail – particularly the ‘Pay Day by Pay Day’ variant.

While the group might prefer an employment landscape where low-paid and sometimes vulnerable workers were not having to grapple with confusing employment arrangements involving intermediaries, the world is as it is, and the LITRG’s concerns are – as ever – about the practicalities.

Conclusion

This factsheet has been created to help workers inform, navigate and protect themselves. LITRG hopes that in time it will lead to more transparency within the sector and fewer troublesome providers.

Useful links

About The Author

The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation to give a voice to those who cannot afford to pay for tax advice.
LITRG comprises tax specialists from professional practice and the voluntary sector, from publishing and from HM Revenue & Customs, together with people from a welfare benefits and social policy background. Visit www.litrg.org.uk for further information.